Can a company legally gift a rare currency note to an employee or client — and does it create GST, TDS, or income tax obligations for the company?

GST on the corporate gift

Under the CGST Act, a gift of goods — even without payment — is a supply if made in the course of business. However, Section 17(5)(h) of the CGST Act provides a specific exception: gifts to employees not exceeding ₹50,000 in value per year are not treated as a supply and do not attract GST. Gifts exceeding ₹50,000 per employee per year are a deemed supply and GST applies at the applicable rate.

For a numismatic note gifted to an employee at ₹30,000 fair market value — below the ₹50,000 threshold — no GST is payable on the gift itself. For a note valued at ₹80,000 — above the threshold — GST at 12% (for a banknote) is payable on the full ₹80,000. The company bears this GST; it cannot charge it to the employee for a gift transaction.

For gifts to clients (not employees), the GST position is different. Client gifts are typically not within the Section 17(5)(h) exemption. A company gifting a note to a client is making a supply and must account for GST at 12% on the fair market value. The company cannot charge this GST to the client in a gift transaction, so it becomes an additional cost of the gift.

TDS obligations

Under Section 194R of the Income Tax Act (introduced from 1 July 2022), any person responsible for providing any benefit or perquisite to a resident in the course of business or profession must deduct TDS at 10% on the value of that benefit if the aggregate exceeds ₹20,000 in a financial year. A company gifting a rare note worth ₹30,000 to a business associate or dealer must deduct 10% TDS — ₹3,000 — and deposit it with the Income Tax Department. This provision was specifically introduced to capture non-cash benefits and gifts.

For gifts to employees, TDS under Section 192 applies — the value of the gift is treated as perquisite income and added to the employee's salary for TDS computation. The employer deducts TDS at the applicable slab rate on the total salary including the gift value.

In the hands of the recipient

An employee who receives a currency note as a perquisite/gift reports it as salary income — the fair market value is added to their Form 16 by the employer. A client or associate who receives it as a business gift reports it under 'income from other sources' under Section 56(2)(x) if the aggregate from non-relatives exceeds ₹50,000 in the year. The Section 56(2)(x) threshold is separate from and in addition to the Section 194R TDS.

Laws & authorities referenced in this chapter

CGST Act 2017 — §17(5)(h) (employee gift exemption up to ₹50,000 per year)

Income Tax Act 1961 — §194R (TDS at 10% on business perquisites/benefits above ₹20,000 aggregate)

Income Tax Act 1961 — §192 (TDS on salary including perquisite value)

Income Tax Act 1961 — §56(2)(x) (gift exceeding ₹50,000 from non-relatives taxable as income)

Income Tax Act 1961 — §17(2) (definition of perquisite — includes gifts above prescribed limits)